Erasing Your Hard Disk And Dumping It In A Canal Turns Out Not To Be As Wise A Move As It Sounds


Today's sad news for Raj Rajaratnam and his constellation of illnesses is a solemn reminder to all of us that, however nice it is to generate outsize returns, nobody really wants to go to jail for it. Obviously the best way to do that is not to do anything illegal, but life being what it is, it's important to be prepared just in case you one day should find yourself in possession of a hard disk containing incriminating information. For one thing, you probably shouldn't get caught on a wiretap discussing how you destroyed it. More importantly, if you must try to profit from your illegally obtained hard disk, DON'T shop it to Teza Technologies, the dodgy Citadel spin-off that is keeping a candle burning in the window for when Sergei Aleynikov gets out of jail in 8 years.

Yihao "Ben" Pu seems to have been only about a C- student of past scandals. For one thing, he couldn't resist the strange allure of Teza. He did manage to avoid wiretaps when he allegedly stole a bunch of code from Citadel, but was tripped up because the buddy whom he charged with destroying the evidence (1) half-assed it, dumping it intact in a single, albeit watery, dumping spot, and (2) went to the Citadel's private investigators the next day and showed them where their diver (!) could find the hard drives:

A friend of Pu’s (Individual A) told agents that he was at Pu’s apartment with Pu and others twice on Aug. 26. That night, Pu, Individual A and another person loaded a desktop computer, hard drives and other computer equipment into Individual A’s car. On Aug. 27, Pu set up the computer equipment in Individual A’s apartment and allegedly spent portions of that day and the next day “cleaning” the hard drives. About 9 p.m. on Aug. 28, Pu allegedly called Individual A and told Individual A to “just dump everything” except for one particular hard drive that Pu had earlier identified for Individual A. Individual A told agents that he drove from his apartment looking for a place to dump the computer equipment before finally throwing a bag containing the hard drives given to him by Pu over a fence into the sanitary canal** off Sheridan Road near the Wilmette Harbor. The next day, Individual A gave the retained hard drive that Pu indicated was the most important to the office manager for his attorney. The same day, Individual A accompanied representatives of a private forensic investigation firm and others to the canal and he showed them where he threw the computer equipment. The next day, a diver recovered six hard drives from the canal in the same location identified by Individual A.

While Citadel fired and sued Pu in August, there's some symbolism in the fact that his criminal prosecution was launched today, coinciding with Raj's longest ever sentence for insider trading. The SEC and prosecutors will be happy to tell you that insider trading is eeeeeevil because it undermines "confidence that the markets are fair and the playing field is level," and that for hedge funds, it is "is akin to a performance-enhancing drug that provides the illegal ‘edge’ to outpace their rivals and make even more money."

So why is it so important to arrest this dude? Because he maybe stole code for Citadel's trading signals, or "alphas," the performance-enhancing drug that Citadel uses to get an edge over other investors and make even more money:

The alphas have inherent value to Citadel’s business and if another company gained access to the alphas, it might be able to develop or improve a competing business. Even if an individual trading alone obtained and made trades based on Citadel’s alphas, those trades would compete with Citadel’s trades and limit or eliminate the profits that Citadel could make using its proprietary trading strategies.

Former Citadel Employee Charged With Stealing Data on Trading Strategies [Bloomberg]

Former Citadel Employee Arrested for Theft of Financial Firm's Trade Secrets [US Attorney N.D.Ill., pdf]

** Disappointingly, the "sanitary canal" does not look as gross as it sounds.


Having George Soros As A Dad Isn't All It's Cracked Up To Be (Well, It Sort Of Is, But Still, It Can Be Tough Sometimes, But Not Usually)

Are there many advantages to being born the son or daughter of a billionaire many times over? Sure. Financial security. Unparalleled opportunities. World is your oyster type stuff. But there's also a dark side that few people ever see or talk about, which can make being astonishingly wealthy by virtue of birth all the more isolating and hard. Today, however, in an effort to show kids born into immense privilege that YOU ARE NOT ALONE, the Times has run a profile of Alexander Soros, son of George, which examines the struggles he faced in coming to terms with being rich. They included: Never getting to live in a McMansion. Alex Soros spent his youth padding around a Charles A. Platt-designed 14-room house on a sprawling country estate in Katonah, N.Y. His mother, Susan Weber Soros, now divorced from his father, founded the Bard Graduate Center for the decorative arts and adorned the house with Sargents and Cassatts. Their place in the city was a duplex at 1060 Fifth Avenue. While his parents worked, he spent much of his time with his younger brother, Gregory, now 23 and pursuing a career as an artist; his nanny, Ping, from China; and the staff...Mr. Soros was acutely aware that he lived in a privileged bubble, and sometimes dreamed of living in a subdivision, where he could play football in the street with other boys. “As a kid, all you want to be is normal,” he said. “When all you’re being fed is vichyssoise, you want to eat Big Macs like everyone else.” Gaining weight. After King Low Heywood Thomas, a prep school in Stamford, Conn., he attended New York University, where he tried to come to grips with expectations that came with his last name. For a period, he brooded, and gained weight. Not being seen as an intellectual. “Alex sought anonymity,” said Adam Braun, a former roommate. “He wanted to be known as the intellectual, not the son of the financier.” Alex hated small talk, Mr. Braun added, and he would ditch parties early to go home and curl up with his Baudrillard. Being seen as a "party-boy" who posted pictures on Facebook with captions like “chilling at dad’s house in Southampton, drinking 40s while cruising on the family boat, and making out with the babes," after posting pictures on Facebook with captions like “chilling at dad’s house in Southampton, drinking 40s while cruising on the family boat, and making out with the babes.” ...after graduation, he came out of his shell and started to socialize. He made new friends, some of whom were nightclub habitués looking to trade on his name, he said. It was around that time that Facebook pictures [“chilling at dad’s house in Southampton, drinking 40s while cruising on the family boat, and making out with the babes"] of him popped up. He was shocked to be portrayed as another helium-weight Hamptons party boy swilling away his trust fund. “I became this caricature,” he said. Ultimately, after "wrestling with his moneyed upbringing," Soros came to grips with who he is and what he's worth, monetarily-speaking. He was born rich and he's OK with that. Mr. Soros, now 26, is taking the stage on his own terms, though in a direction his father clearly approves: philanthropy. Last fall, while pursing his Ph.D. in history at Berkeley, the younger Mr. Soros started the Alexander Soros Foundation. Its stated mission is to promote social justice and human rights...These days, he divides the bulk of his time between Berkeley and New York. Alex admits that his lifestyle is wildly at odds with that of most graduate students. He has a house in North Berkeley, a two-bedroom apartment near Astor Place in Manhattan and a place in South Kensington, London. He collects art by Otto Dix and George Grosz, and has “a couple of Magrittes,” he said. He has also given up on the idea that he can escape public scrutiny. His trip to Florianópolis, a Brazilian island getaway, with buddies a couple of years ago somehow landed on Page Six, which had him partying alongside the actor Stephen Dorff (“I’ve never even met Stephen Dorff,” he said). “I live well,” he told the Times. “I try to stay reasonable, but it’s very hard to say what is reasonable. There’s not a how-to book. In a way, if you try to live quote-unquote normal, you’re being disingenuous.” Making Good On The Family Name [NYT]